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Fragmentation of Headquarter Services and FDI

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  • Ronald B. Davies

    ()
    (University of Oregon Economics Department)

Abstract

I develop a simple model in which production of skill-intensive headquarter services are fragmented across borders in order to take advantage of complementarities between types of skilled labor. This setting indicates that FDI tends to come from and go to skill-abundant countries. It also yields an ambiguous effect of FDI on domestic relative wages. If the complementarities between skilled labor types are large enough, then increased FDI increases the wages of both skilled and unskilled labor in the home economy. Thus, this model predicts investment patterns comparable to the horizontal model but requires neither trade barriers nor reductions in home wages.

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Bibliographic Info

Paper provided by University of Oregon Economics Department in its series University of Oregon Economics Department Working Papers with number 2003-25.

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Length: 24
Date of creation: 01 Sep 2003
Date of revision: 01 Sep 2003
Handle: RePEc:ore:uoecwp:2003-25

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Keywords: Headquarter Services; Fragmentation; Foreign Direct Investment;

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References

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Citations

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Cited by:
  1. Mukherjee, Arijit & Suetrong, Kullapat, 2012. "Trade cost reduction and foreign direct investment," Economic Modelling, Elsevier, vol. 29(5), pages 1938-1945.
  2. Egger, Peter & Larch, Mario & Pfaffermayr, Michael, 2007. "On the welfare effects of trade and investment liberalization," European Economic Review, Elsevier, vol. 51(3), pages 669-694, April.
  3. Nicolas Debarsy & Fei Jin & Lung-Fei Lee, 2013. "Large sample properties of the matrix exponential spatial specification with an application to FDI," Working Papers hal-00858174, HAL.
  4. Badi H. Baltagi & Peter Egger & Michael Pfaffermayr, 2005. "Estimating Models of Complex FDI: Are There Third-Country Effects?," Center for Policy Research Working Papers 73, Center for Policy Research, Maxwell School, Syracuse University.
  5. Godart, Olivier & Görg, Holger & Greenaway, David, 2012. "Domestic Multinationals, Foreign Affiliates, and Labour Demand Elasticities," IZA Discussion Papers 7061, Institute for the Study of Labor (IZA).
  6. Konstantin M. Wacker & Krishna Chaitanya Vadlamannati, 2011. "Do Multinationals Influence Labor Standards? A Close Look at US Outward FDI," Courant Research Centre: Poverty, Equity and Growth - Discussion Papers 98, Courant Research Centre PEG.
  7. Blonigen, Bruce A. & Davies, Ronald B. & Waddell, Glen R. & Naughton, Helen T., 2007. "FDI in space: Spatial autoregressive relationships in foreign direct investment," European Economic Review, Elsevier, vol. 51(5), pages 1303-1325, July.
  8. Markus Kelle, 2012. "Crossing Industry Borders: German Manufacturers as Services Exporters," wiiw Working Papers 92, The Vienna Institute for International Economic Studies, wiiw.
  9. Markus Kelle, 2012. "Crossing Industrial Borders: German Manufacturers as Services Exporters," Development Working Papers 329, Centro Studi Luca d\'Agliano, University of Milano, revised 27 Mar 2012.
  10. Ledyaeva, Svetlana, 2007. "Spatial econometric analysis of determinants and strategies of FDI in Russian regions in pre- and post-1998 financial crisis periods," BOFIT Discussion Papers 15/2007, Bank of Finland, Institute for Economies in Transition.
  11. Arti Grover, 2010. "Outsourcing Versus Foreign Direct Investment: A Welfare Analysis," Working Papers id:3010, eSocialSciences.

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